The first Cryptocurrency, Bitcoin (BTC), has a very basic structure. It’s designed to transfer, receive, and store value in a virtual and encrypted manner using a distributed ledger system, with comparable functions to money. Because the money is virtual and is traded on virtual platforms,visit this Website for more details, it is vulnerable to several risks. These risks stop the users from adopting it as a commodity. When working with cryptocurrencies, risk managers should be aware of at least seven distinct issues.
Factors hindering adoption of cryptocurrency
The following factors hinder it from adoption as a basic currency:
1. It is highly volatile:
The volatility of the cryptocurrency market, as well as the fact that, unlike normal currency markets, cryptocurrency markets are a socially constructed category, are two of the most pressing concerns confronting the industry. Furthermore, all cryptocurrency transactions take place through the internet, providing unique paperwork issues. Many individuals, notably authorities, are sceptical of crypto currency’s legality because of its online nature and believe it is largely used for illegal activities such as financial fraud and narcotics trafficking.
2. It has not built the full trust of the users.
One of the major difficulties that Cryptocurrency confronts is establishing trust among governments and customers, with the ultimate goal of maintaining the existence of cryptocurrencies. Establishing standards and processes for customer monitoring and the management of virtual currencies and trades, as well as using automation to record and communicate such rules and processes to the proper parties, are all part of building regulatory trust in cryptocurrencies. Obtaining authorities’ trust also necessitates maintaining adequate data that are lawfully morally defensible owing to technological advancements. These documents must include details on which vetting techniques were used, how, from whom, or in what territory the vetting took place, and what information was conveyed to consumers at each point of their journey. On the consumer side, records must be retained.
3. It is highly vulnerable to cyber-attacks.
Despite the fact that technology has advanced substantially to give the best security, cybercriminals continue to follow patterns and develop at the same time. The majority of markets have centralised risk, leaving them prone to computer hackers. A more decentralised approach may give the best protection that most users desire. You understand the need for security if you’ve already dealt with cash over the internet.
According to a famous web source’s data, approximately million dollars are looted from exchanges almost every year. Hackers had a successful year in 2018, with an increase of thirteen times the number of items stolen as in 2017.
4. The lack of liquidity is a major hindrance in its path to success.
You should be aware that liquidity is the foundation element in all markets, just as you should be aware that air is composed of % nitrogen and 21% oxygen, with remnants of many other elements in the remaining 1%. When a market is devoid of liquidity, it suggests that this is out of equilibrium and somebody has lost grip. When liquidity is scarce, dominant holders can exercise influence over prices and alter them at will. In a market with lower liquidity, costs might become unexpected, which is a concern because Cryptocurrency is already unpredictable. Additionally, in a market with insufficient liquidity, the larger participants, such as exchanges, would wield influence, denying you a fair chance to earn from trading. This is already occurring since large corporations choose to issue tokens to important players who have nearly one million dollars in cash. This implies that those who distribute the tickets are in authority.
Conclusion: Cryptocurrency is electronic cash that faces several market acceptability challenges and dangers. Reasons such as volatility, investor trust, increased possibilities of hacker assaults, and a lack of liquidity, if addressed by better tactics and rules, will enhance the chances of adoption of cryptocurrency.